Why Stabilization Policy is Destabilizing
The call for "price stabilization" was part of the recent Republican debate. Despite its attractive appearance, having the Fed try to "stabilize prices" is a very bad idea.
The call for "price stabilization" was part of the recent Republican debate. Despite its attractive appearance, having the Fed try to "stabilize prices" is a very bad idea.
Fed policymaking is all about political expedience. When we see Fed policy, we must keep in mind that "managing the economy" is secondary to managing public debt service and public expectations.
The vast American welfare system is imploding. Future tax revenues will not come close to meeting future obligations. Something must give.
As the national debt explodes and the federal government ramps up borrowing and spending, borrowing costs increase as well. Ordinary Americans will suffer the effects in due time.
Since the end of World War II, the US dollar has been the world's reserve currency. That status may well change because US monetary authorities insist on inflating the dollar into oblivion.
Supposedly, the "big news" is the decline of inflation. However, the monetary and political forces driving the latest bout of inflation have not gone away.
In the wake of bad news on inflation, the Federal Reserve is pushing up interest rates. However, a Fed-induced higher rate is not the same as an interest rate decided by the market.
While court economists such as Paul Krugman insist that inflation is government's way of ensuring full employment, in reality, inflation is one of the many ways governments steal from productive people.
Contrary to the government's line that "inflation hurts everyone," inflation really is a wealth transfer from those without political power to the politically connected.
As family life descends into crisis in the USA, many conservatives call for state intervention to "fix" things. It's state intervention that created the problems in the first place.